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Is it better to use card or cash abroad?

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This blog post has been sponsored by HSBC.  Content my own - enjoy!

Going abroad: card or travel money?

If you are travelling outside of the UK then you will need to consider how you will pay for things in the country you are visiting.  Whilst exchange rates are always changing for foreign currency, and getting the best exchange rate for your holiday money is one concern, another is whether you should use a card or travel money outside of the UK.  Is it better to travel with cash or card? In this blog post let’s look at the pros and cons of both to decide which is best.

Should I use cash abroad?

When I used to go on holiday I would always take cash only.  It was part of the exciting holiday experience - saving money for spending money and going to exchange it at a travel money counter.  However, now I think twice about doing this.  Here’s why:

·         You could lose all your holiday money

One of the big pitfalls with exchanging all of your holiday money for cash is there’s no back up if it’s misplaced or stolen.  You simply lose all your travel money!

Of course, if you have a suitable travel insurance then it should cover you for stolen cash, but you’ll need to report this to the police and provide enough evidence to your insurer to make a claim.  It won’t instantly put the cash back in your pocket and your insurer may not cover you for the full amount.  Check your policy details.

If you do decide to only take cash then my recommendation is to only carry what you need on your person when out and about in the foreign country.  Leave the rest well hidden in your accommodation, or ideally in a locked safe only you know the combination to.

·         Cash might only be good for one country

If you are travelling around, through various countries, then each country may have its own currency.  In many European countries the Euro is used so this makes things a bit easier when it comes to carrying cash.  Otherwise, you’ll need to keep exchanging your cash for the correct currency in every country you enter.

·         You’ll need a back up

Even if you decide to take cash, you’ll need a backup card, just in case.  It may be that you exchange too little foreign currency and need more whilst you are away.  Or there could be businesses that only accept card payments, especially given the coronavirus pandemic events and a cashless society perhaps being the norm in the future.  Also, if you plan to hire a car they will hold a deposit on a credit card.


Pros of using travel money abroad

However, there are also some benefits to using travel money abroad.  Let’s take a look:

·         Easier to budget

If you’re on a strict budget then taking cash can make it easy to stop overspending.  When I was younger I’d divide my foreign cash up into the number of days I was travelling for and stick to this budget.  Seeing the actual money can help to keep track of spending and make budgeting visual.  With a card it can be too easy and too tempting to overspend.

·         No transaction charges

There are no further charges when you pay with cash.  You know how much you have spent and won’t be surprised by any further foreign transaction changes appearing on a statement.

·         Sometimes needed to use facilities

When we travelled through Europe we needed cash to use many of the public toilets.  Some accepted card payments, but occasionally our cards didn’t work on these machines (I’m not sure why) so we had to have coins available to use the toilets at service stations and in other public areas.


Is it better to use a card to pay for things abroad?

Nowadays, I mostly use a credit card when I travel abroad.  Mostly this is for ease of travelling and ease of paying for things.  I also take a debit card in case I need to withdraw money from an ATM and I also take a small amount of cash too, to cover all eventualities.

Spending on a credit or debit card when abroad also has its pros and cons.  Let’s start by taking a look at the advantages of using a credit or debit card abroad:

·         Can be cheaper than buying foreign currency

There are now many cards on the market with special 0% foreign transaction fees, so plan in advance and apply for a credit card with zero fees when it comes to transactions and cash withdrawals.  This could be the cheapest way of spending money abroad and a smart way of using a credit card, especially if you also opt to pay in the local currency when prompted at ATMs or checkouts.

·         Your provider will offer fraud and loss protection

Credit cards and debit cards will automatically have some sort of bank fraud protection as standard.  Some credit card transactions are protected under Section 75 of the Consumer Credit Act 1974.  The credit card provider is jointly liable with a retailer if something goes wrong with a purchase over £100 and you don’t get what you paid for.  Debit cards also have a chargeback feature which means you may be able to get your money back if you don’t get the goods or services you paid for.

·         Block your card if stolen

If cash is stolen then it will be spent by the thief, however if your card is stolen you can stop any fraudulent spending in its tracks quickly and easily.  Mobile and online banking make it easy to block your card and report it as stolen.  A top tip is to add the customer service number from the back of your credit and debit card to your contacts on your mobile phone so you can easily contact your card provider if your card is stolen.

·         Track your spending

You can easily check your travel spending by using online or mobile banking to see an up-to-date list of transactions.

·         No need to exchange currency when travelling through multiple countries

If you are travelling from country to country and each has its own currency, then it can be a chore to keep exchanging cash.  Cards are universal with Visa and Mastercard globally recognised as payment options, providing a convenient and time-saving option.

·         No need to carry around cash

In unknown countries and locations you may feel vulnerable carrying around cash and being seen paying in cash.  Cards can be less appealing to pickpockets and if stolen you can cancel the card so they can’t spend your money.  Plus, you can claim back any stolen money that is spent on card.


Disadvantages of using a credit or debit card abroad

It’s not all good news however when it comes to spending on credit and debit cards when abroad.  Here are the cons you need to consider so you can make an informed decision when it comes to spending abroad:

·         Your card may be blocked

There’s nothing worse than arriving in a foreign country and your card being declined at checkout.  This happens because your card provider is trying to prevent fraudulent activity on your card and they realise the country is different to your home country.  Ultimately it’s for your protection, but to avoid this happening you should let your card provider/bank know your holiday dates and the countries you are visiting.  If it does happen then call the number on the back of your card and answer some security questions to prove your identity and remove any blocks on your card.  Another top tip is to carry more than one card with you so you have a backup card if on is declined or blocked.

·         Foreign transaction fees can be costly (but there is a solution)

Before spending on your credit card or debit card abroad, make sure you are aware of any fees.  You’ll need to know if there is a fee to withdraw cash from an ATM when abroad and also if there is a fee per transaction when you pay on your card.  If so, these can add up, especially if you are making lots of small purchases or regularly withdrawing small amounts of foreign currency.  Take the advice from above and apply for a credit or debit card with 0% foreign transaction fees and cash withdrawals.

·         You may need to locate ATMs

If you need cash to make a payment then you’ll have to locate an ATM to withdraw money from your card.  Some small shops and markets may not accept card payments.  If you are outside of a city or town, and especially if you are in a remote location, then you may not easily locate an ATM for withdrawals.  It’s best to carry at least some travel money instead of having no way to pay in these situations.

·         Easy to overspend

Without seeing the physical cash and budget you have each day to visualise your spending, it can be easy to overspend on a credit or debit card.  You don’t want to come back off holiday with high debts to repay, so make use of mobile banking to keep an eye on your spending and tot up how much you are spending in your head each day or make a note in the Notes section of your smartphone to keep track.


Conclusion: so, is cash or card better when travelling?

Neither option is right or wrong.  It’s actually better to plan to use both.  Just like in the UK, there are businesses that will only accept cash and even those which will only accept card.  It’s best to be prepared for all eventualities and take a mix of cash and card.  My recommendation is to take some cash and at least two cards.  That way you are covered in all situations and won’t be caught short.

Here’s a great roundup of the pros and cons of each from HSBC:

HSBC Going Abroad Card or Travel Money


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